Main Article Content
Owing to inconclusive results on the relationship between capital structure and profitability world over, there is need to take into consideration a moderating variable to strengthen the relationship. This study therefore, introduces board independence as moderator to examine its effect on the relationship between capital structure and profitability of listed industrial goods companies in Nigeria for the period 2006-2018. The population of the study comprises of all the twenty one (21) listed industrial goods companies in Nigerian Stock Exchange (NSE) as at December, 2018. Out of which ten (10) companies constitute the sample of the study. The study utilized documented data collected from annual reports and accounts of the sampled companies, data was first analysed by means of descriptive statistics to provide summary statistics for the variables subsequently, correlation analysis was carried out using Pearson correlation technique for the correlation between the dependent and independent variables and OLS regression technique was employed. The results revealed that capital structure proxy by debt to equity ratio has a significant positive impact on profitability while board independence provides negative and significant effect on the relationship between capital structure and profitability of listed industrial goods companies in Nigeria. Based on these findings the study recommends that policy makers as well as the management of industrial goods companies should identify the optimal capital structure as well as complying with the code of corporate governance in ensuring perfect mixture of board independence as some of the companies are not abiding by the 50% mixture between the executive and non-executive directors in the board.
Bokpin GA, Arko AC. Ownership structure, corporate governance and capitalstructure decisions of firms: Empirical evidence from Ghana. Studies in Economics and Finance. 2009;26(4):246-256.
Saeed MM, et al. Impact of capital structure on banking performance (A Case Study of Pakistan). Interdisciplinary Journal of Contemporary Research in Business. 2013;4(10):393-403.
Burca A-M, Batrinca G. The determinants of financial performance in the romanian insurance market. International Journal of Academic Research in Accounting, Finance and Management Sciences; 2014. Available:https://doi.org/10.6007/IJARAFMS/v4-i1/637
Chechet IL, Olayiwola AB. Capital structure and profitability of nigerian quoted firms: the agency cost theory perspective. American International Journal of Social Science. 2014;3(1):139–158. Available:https://doi.org/10.1080/10426914.2010.536937
Aggarwal R, Kyaw NA, Zhao X. Leverage and firm value: A global perspective. Journal of International Business and Economy. 2011;12(2):1-26.
Antwi S, Mills EF, Zhao X. Capital structure and firm value: empirical evidence from Ghana. International Journal of Business and Social Science. 2012;3(22):103–111.
Ogbulu OM, Emeni FK. Capital structure and firm value: empirical evidence from Nigeria. International Journal of Business and Social Science. 2012;3(19):252–261.
Cuong NT. Threshold effect of capital structure on firm value: evidence from seafood processing enterprises in the South Central Region of Vietnam. International Journal of Finance & Banking Studies. 2014;3(3):2147-4486.
Adenuga AA, Ige AA, Kesinro OR. Financial leverage and firms’ value: a study of selected firms in Nigeria. European Journal of Research and Reflection in Management Sciences. 2016;4(1):14-32.
Hadiwijaya T, Lahindah L, Pratiwi IR. Effect of capital structure and corporate governance on firm value (study of listed banking companies in indonesia stock exchange). Journal of Accounting and Business Studies. 2016;1(1):39-55.
Khanna S, Srivastava A, Medury Y. A study of capital structure dynamics on the value of Indian firms using panel threshold regression model. Int. Journal Management Practice. 2016;9(1):40-55.
Rastogi S, Saxena P. Leverage and Firm’s Value: An empirical review of concept with reference to high leveraged indian companies. International Journal of Research in IT and Management (IJRIM). 2016;6(1):99–104.
Baron RM, Kenny DA. The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology. 1986;51(6):1173-1182.
Yermack D. Higher market valuation for firms with a small board of directors. Journal of Financial Economics. 1996;4(5):185–211.
Al-Matari EM, Al-Swidi KA, Btfadzil HF. The effect on the relationship between board of directors characteristics on firm performance in oman: Empirical Study. Middle-East Journal of Scientific Research. 2014;21(3):556–574.
CCG. Financial Reporting Council (FRC ) of Nigeria National Code Of Corporate Governance; 2016.
Abor J. The effect of capital structure on profitability: An empirical analysis of Listed firms in Ghana. The Journal of Risk Finance. 2005;6(5):438-445.
Lawal AI. Capital structure and the value of the firm: evidence from the Nigeria banking industry. Journal of Accounting and Management. 2014;4(1):31-41.
Ahmadina A. Afrasiabishani, Hesami. A comprehensive review on capital Structure theories. The Romanian Economic Journal. 2012;XV(45):3-26.
Uremadu SO. Financial management: concepts, analysis and applications. Enugu: Precision Publishers Limited; 2004.
Besley S, Eugene FB. Essential of managerial finance (14th ed.). New Jersey: Prentice Hall Pearson; 2008.
Lipton M, Lorsch JW. A modest proposal for improved corporate governance. The Business Lawyer. 1992;48(1):59-77.
Pandey IM. Financial management. New Delhi: Vikas Publishing House Ltd; 2000.
Bin-Sariman AS, Ali A, Nor MNM. Board of directors’ quality and firms’ debt financing: the moderating effect of insider ownership – evidence from Omani firms. Applied Economics. 2016;48(5):402–410. Available:https://doi.org/10.1080/00036846.2015.1080804.
Akinyomi OJ. Effect of capital structure on firms performance: Evidence from Nigerian Manufacturing Company. International Journal of Innovative Research and Studies. 2013;2(9). ISSN 2319-9725
Chowdhury A, Chowdhury S. Impact of capital structure on firm’s value: Evidence from Bangladesh. Business and Economic Horizons. 2010;3(3):111-122.
Modigliani F, Miller M. The cost of capital, corporation finance and the theory of investment. American Economic Review. 1958;48(3):261-275.
Babaei Z, Shahveisi F, Jamshidinavid B. Correlation between financial leverage and firm value in companies listed in the tehran stock exchange: A case study. Research Journal of Finance and Accounting. 2013;4(5):39–48.
Hansen BE. Threshold effects in non-dynamic panels: Estimation, testing and inference. Journal of Econometrics. 1999;93(2):345-368.
Esmail S, Seyyed HT. The relationship between capital structure and value of equities in firms listed in tehran stock exchange. Indian Journal of Fundamental and Applied Life Sciences.2015;5(2):1311–1319.
Feng-Li L, Chang T. Does debt affect firm value in Taiwan? A panel threshold regression analysis. Applied Economics. 2015;43(1):117-128.
Farooq MA, Masood A. Impact of financial leverage on value of firms: Evidence from cement sector of Pakistan. Research Journal of Finance and Accounting. 2016;7(9):73–77.
Aggarwal D, Padhan PC. Impact of capital structure on firm value: evidence from Indian Hospitality Industry. Theoretical Economics Letters. 2017;7(1):982-1000.
Ibrahim M. Capital structure and firm value in nigerian listed manufacturing companies: an empirical investigation using Tobin's Q Model. International Journal of Innovative Research in Social Sciences & Strategic Management Techniques. 2017;4(2):112-125.
Minh-Ha N, Minh-Tai L. Impact of capital structure and cash holdings on firm value: Case of Firms Listed on the Ho Chi Minh Stock Exchange. International Journal of Economics and Financial Issues. 2017;7(1):24-30.
Demirgunes K. Capital structure choice and firm value: New empirical evidence from asymmetric causality test. International Journal of Financial Research. 2017;8(2):75-91.
Hatemi JA. Asymmetric causality tests with an application. Empirical Economics. 2012;43(1):447-456.
AL-Matari YA. Board of directors, audit committee characteristics and the performance of public listed companies in Saudi Arabia. Thesis. Universiti Utara Malaysia; 2013.
Sualehkhattak M, Hussain MCH. Do growth opportunities influence the relationship of capital structure, dividend policy and ownership structure with firm value: empirical evidence of KSE? Journal of Account Mark. 2017;6:216.
Shungu P, Ngirande H, Ndlovu G. Impact of corporate governance on the performance of commercial banks in Zimbabwe. Mediterranean Journal of Social Sciences. 2014;5(15):93–105.
Yang W. The influence of board of director networks and corporate governance on firm performance and CEO compensation Yan Wang Thesis submitted for the degree of Doctor of Philosophy Accounting and Finance Division University of Stirling United Kingdom; 2012.
Kanju H. Corporate Governance and Firm’s Exporting Decision: Evidence from Pakistan Stock Exchange; 2016.
Akinyomi OJ, Adedayo OE. Corporate governance and the profitability of Nigerian Banks. Asian Journal of Finance & Accounting. 2015;7(1):172.
Bhagat S, Bolton B. Corporate governance and firm performance. Journal of corporate finance. 2007;14(3):257-273.
Hassan SU, Farouk MA. Board of director’s characteristics and performance of listed deposit money banks in Nigeria. Journal of Finance and Bank Managemen. 2014;2(1):89–105. Retrieved from
Jensen MC. Agency costs of free cash flow, corporate finance and takeovers. American Economic Review. 1986;76(2):323-339.
Thomsen S, Pedersen T. Ownership structure and economic performance in the largest European companies. Strategic Management Journal. 2000;21:689-705.
Kurawa JM, Kabara AS. Impact of corporate governance on voluntary disclosure by firms in the downstream sector of the Nigerian Petroleum Industry. Proceedings of World Business Research Conference, (pp. 1-19). Novotel World Trade Centre, Dubai, UAE; 2014. ISBN: 978-1-922069-48-1.
Gujarati DN, Dawn PC. Basic econometrics (5th ed.). New York: McGraw Hill; 2009.
Igbinovia EL, Ogbeide DO. Capital structure and firm value of selected quoted manufacturing firms in Nigeria. Dutse Journal of Economics and Development Studies (DUJEDS). 2019;7(2):66-77.
Ebaid IE. The impact of capital-structure choice on firm performance: empirical Evidence from Egypt. Journal of Risk Finance. 2009;10(5):477-487.